Two years after it abruptly stopped funding loans, Impac Mortgage Holdings Inc., once a leader in the now-defunct alternative-A market, is coming out of hibernation.
The Irvine company has outlived other once high-flying Southern California home lenders like New Century, IndyMac and Countrywide. "We are the last guys standing," said Joseph Tomkinson, Impac's chairman and chief executive.
Since August 2007, Impac has confined its activities to reducing debt, servicing the loans it made and starting a handful of side businesses. It is down to 300 employees, one-quarter of its work force at the height of the housing boom in 2006.
But Tomkinson said Impac "is getting ready to enter the retail [lending] market in a big way." The company is negotiating a $500 million warehouse line it expects to get by yearend and says it expects to start originating loans next year.
Unlike the reduced-documentation mortgages that Impac specialized in during the fat years, it intends to write plain-vanilla loans this time around.
"The product that is being originated today is some of the best product that's been originated in years," Tomkinson said. "You're underwriting with property values back to 2002, and everything is fully documented."
In 2006 Impac wrote $2 billion of loans. But the liquidity crisis began late that year, forcing it to retrench. By mid-2007 it was on pace to originate just $300 million for the year. A few months later it halted lending altogether.
Todd Taylor, Impac's chief financial officer, said it survived largely because it managed to negotiate out of its five warehouse lines and sell most of its loans at a loss in 2007, while margin calls were crippling other lenders. The company still owes $171.7 million to UBS AG on a warehouse line that was converted to a term loan. This is the last of Impac's significant liabilities, Taylor said.
Impac's stock was delisted from the New York Stock Exchange last year and now trades on the Pink Sheets.
During the interim Impac has set up five fee-based businesses: a real estate brokerage, an escrow business, a loan-modification service, a company that looks after repossessed homes and one that disposes of them. Tomkinson said these businesses "are all earning money."
The company is also looking to buy a title insurer. Such an acquisition, along with the five fee businesses and a revived lending business, "will all feed off each other," Tomkinson said.
"If I prequalify somebody for a loan, I send them to a broker, sell them a house, send them to our title insurer and fund the loan," he said. "All of these things interplay with one another."
To be sure, Impac has tried to reinvent itself before. Last year it talked about buying distressed loans, and it acquired a platform from UBS for servicing them. But Impac later sold the operation to York Capital Management LLC.
"If you're considering getting back into the mortgage business, you have to fashion a long enough runway and have plenty of capital because it's not going to be as fast a takeoff as most people think," said Bill Dallas, whose Ownit Mortgage Solutions Inc. was among the first high-profile casualties of the mortgage crisis. "They're trying to figure out how to build a profitable business in this environment, and it's not that easy."
In particular, Dallas cited the current difficulty in obtaining warehouse lines, particularly from banks that are also competitors in originating mortgages. "They have to sell their loans and warehouse their loans, and the competitor is a bank that is turning the spigot off," he said.
It probably does not help matters that two of the few remaining warehouse lenders — Colonial BancGroup Inc. and Guaranty Financial Group — have warned in recent weeks that they may fail.
Taylor acknowledged that warehouse lines (which Impac itself once offered to its correspondents) are "very hard to come by because there's no liquidity."
Impac services 57,000 loans, totaling $6.5 billion. It has modified roughly 5,000 of them since January. But it is not participating in the Obama administration's loan-mod program, which Tomkinson said is "exacerbating the situation," because it encourages servicers to modify loans for borrowers "who don't have any skin in the game."
To make sure only borrowers intent on paying get a break, Impac charges a fee of up to $2,000 for a completed loan modification. Tomkinson noted that many "other groups" charge fees up-front before determining whether the borrower qualifies for a modification.
"The borrower has to take some responsibility," he said. "We charge a fee if the borrower is qualified, and it's on a sliding scale, so there's no up-front money, and only if they are successful in getting the modification after reunderwriting the loan. Any borrower willing to put more cash up is sincere."